Archive | June, 2008

Killing Netflix “Profiles” – A Stupid Business Decision

19 Jun

Netflix LogoNetflix is ending its longstanding policy of allowing customers to hold multiple profiles under a single account.  The announcement was sent to users today:

We wanted to let you know we will be eliminating Profiles, the feature that allowed you to set up separate DVD Queues under one account, effective September 1, 2008.

Each additional Profile Queue will be unavailable after September 1, 2008. Before then, we recommend you consolidate any of your Profile Queues to your main account Queue or print them out.

The profiles feature was an excellent way for multiple people living in a single household (husband/wife, roommates, etc) to maintain separate queues and profiles of the movies they have liked, disliked, etc., while keeping a joint account of discs sent to the same address for billing purposes and convenience.

The rationale for the move is not substantially explained in the Netflix communication.

While it may be disappointing to see Profiles go away, this change will help us continue to improve the Netflix website for all our customers.

The most likely explanation is that Netflix has determined that joint accounts are causing them to lose revenue due to their pricing structure.  In effect, multiple users in a single household gain scale efficiencies because it is cheaper to have a single account sending 4 discs at a time ($23.99) than it would be sending 2 different accounts 2 discs at a time ($13.99 x 2, or $27.98, a $4.00 difference).  If multiplied across millions of accounts on a monthly basis, that could mean a lot of additional revenue for Netflix.

… IF it doesn’t turn a large number of their customers away.

The real shocker can be found on the FAQ linked from the email sent out today:

You will not be able to transfer your Profiles data to a separate new account

Consider moving all DVD titles in your Profiles Queues to your main account Queue

How does that make any sense?  Does Netflix seriously expect the wives and roommates and brothers and sisters who have been sharing accounts to merge their accounts into a single account and lose all of the individuality and “social profile” data that they used to enjoy from the site?  This mass of data, and the power of the Netflix recommendation engine was one of the major differentiators that kept its users on the site.

To quickly come to my point, this is a plain stupid business decision.  Here’s why:

  • Users will now have to pay two bills where they used to pay one
  • Users will lose all of the data they have built up over time while using Netflix, eliminating the barrier that once kept them from switching to a competitor, such as Blockbuster
  • Users who decide to stay with Netflix will be forced to spend hours re-entering their movie ratings and rental queues
  • Users who have been too lazy to close or downgrade their accounts won’t renew their accounts, killing the “momentem” that once kept them paying every month
  • Users who do decide to turn their single account into two different accounts will feel like Netflix is nickle-and-diming them, forcing them to pay more for a less convenient, equivalent service that they used to pay less for
  • New customers that might have been attracted to the idea of a single Netflix account per household (it’s easy to convince a new roomie to pay $3.00 a month to move from a 2 to 3 disc account, when they might not have been willing to pay $9.00 a month to get an account of their own)

Who wins from this decision?

  • Traditional competitors who can take advantage of the mass of new potential customers shopping for a DVD rental service (e.g. Blockbuster)
  • New competitors (e.g. iTunes movie downloads) who will open their arms to an influx of users who no longer have any reason to stay with Netflix and its old DVD-by-mail technology

Am I missing something here, or did Netflix just make a huge blunder?

Apple’s MobileMe: A Good Idea for the Wrong Price

11 Jun

Apple’s new MobileMe service, which will allow consumers to sync their mail, calendar, contacts, and other content across their phone, personal computer, and any other device which can access the web, has been been called “The Most Interesting part of this year’s WWDC” and heralded by some to be poised to “Crush Exchange and Google.” While the enthusiasm for a clean, integrated connectivity service is understandable, it exaggerates the willingness of consumers to pay for a service that, while imperfect in its implementation today, is almost entirely available today FOR FREE.

I don’t believe that MobileMe adds enough incremental value for consumers to be willing to shell out $99 – $149 per year for the ability to do what they can already. MobileMe is a service that is too expensive and too late.

Seamless connection of email between mobile and web? Try Gmail and its handy mobile application for the iPhone and Blackberry.

Seamless connection of calendars? Try Google Calendar and Google Sync for mobile, which smoothly integrates into your Blackberry.

Photos hosted on your desktop and online? Try using Picasa Web plugins for iPhoto, or the Picasa application for PCs.

Getting this kind of functionality today does require that users plug the pieces together on their own. And it isn’t necessarily perfect. Admittedly, some of the features offered by MobileMe are not offered elsewhere – at least that I know about. For instance, constantly synchronized filing and sorting images and files (if I merge two albums in iPhoto, after both have been uploaded to Picasa Web, I have to duplicate that action on the Picasa website) and synchronized contacts (my BlackBerry integration with Lotus Notes or Outlook is perfect, but MobileMe, which is positioned as “Exchange for the rest of us,” is clearly targeting users that have neither) are both new and useful services, but are not justifiable at this price point.

Apple announced its new MobileMe service yesterday at the WWDC in San Francisco. The service is not yet available on Apple’s website (you can currently only sign up to be notified when it is ready), so I can only speculate as to its full functionality. MobileMe will replace its existing .Mac service. Given how weak customer enthusiasm had been for the original .mac service (which I also feel is largely due to its price relative to other offerings from Google and Yahoo), however, MobileMe’s heritage isn’t exactly a bragging right.

One reason MobileMe could win some users initially, however, is that consumers may rush in to claim valuable username real estate. “Mitch@Me.com” has a certain ring to it…

What do you think? Are MobileMe’s features enough to win consumers over? Will they be willing to fork out $100 for features that can essentially be pieced together for free online today?

Coverage of the announcement of MobileMe:

Harnessing the Ocean’s Power for Electricity

9 Jun

Finavera Technology\'s AquaBouy, which is to be deployed off the coast of CaliforniaThis week’s Economist contains a couple of interesting articles in its Technology Quarterly outlining a variety of approaches to harnessing natural and renewable sources of energy for human consumption. Specifically, it focuses on technologies capturing power from the ocean.

Wind

The first looks at new technology for off-shore wind farms which would allow them to be located much further off the shoreline, generating more energy from higher-velocity winds and fewer complaints from nearby residents whose views have been blocked.

the stronger winds out at sea can generate more electricity, and hence more revenue: wind blowing at 10m/s can produce five times as much electricity as wind blowing half as fast, and this greatly favours building more offshore wind far

Instinctively, this seems like a winning combination: it moves electrical generation out of “my backyard,” where so few people are willing to have it, while also improving the economics of wind energy by tapping a more reliable, stronger source of wind.

The ability to get the electricity generated offshore back to where it is consumed, and the amount of energy lost in transmission would seem to be major barriers to the technology’s success. As would the cost of the turbines and maintenance, which would both seem considerably greater than a traditional land-based wind farm.

Wave

The second looks at the approaches to harnessing wave power which are showing the most promise.

YOU only have to look at waves pounding a beach, inexorably wearing cliffs into rubble and pounding stones into sand, to appreciate the power of the ocean.

Unlike wind and solar energy installations, wave energy sites could theoretically be located far from the coastline if an easy means of transporting the electricity were developed, once again eliminating the “not in my backyard” objections of most other forms of electrical generation.

Alas, harnessing it has proved to be unexpectedly difficult. In recent years wind farms have sprouted on plains and hilltops, and solar panels have been sprinkled across rooftops and deserts. But where the technology of wind and solar power is established and steadily improving, that of wave power is still in its infancy.

The article outlines a number of different designs and approaches to capturing wave energy, but none appear to be the obvious choice for the future. Each faces obstacles that have thus far kept them from widespread adoption.

A recurring problem, ironically enough, is that new devices underestimate the power of the sea, and are unable to withstand its assault. Installing wave-energy devices is also expensive; special vessels are needed to tow equipment out to sea, and it can be difficult to get hold of them… Another practical problem is the lack of infrastructure to connect wave-energy generators to the power grid. The cost of establishing this infrastructure makes small-scale wave-energy generation and testing unfeasible; but large-scale projects are hugely expensive.

The Role of Silicon Valley

Will the innovation of offshore wind and wave technologies happen in the same place so much technological innovation has occurred in the last twenty years? Interestingly, the article mentions that PG&E, the Bay Area electrical utility, is one of the first adopters of wave technology.

In December Pacific Gas & Electric, an American utility, signed an agreement to buy electricity from a wave farm that is to be built off the coast of California and is due to open in 2012

The PG&E project will involve deploying the Aquabouy, which is produced by Finavera Renewables of Vancouver.

Each Aquabuoy is a tube, 25-metres long, that floats vertically in the water and is tethered to the sea floor. Its up-and-down bobbing motion is used to pressurise water stored in the tube below the surface. Once the pressure reaches a certain level, the water is released, spinning a turbine and generating electricity.

Could this early adoption of wave technology, along with San Francisco Mayor Gavin Newsom’s well-known interest in alternative energy, mean that the Bay Area has an early lead in the development of this, the latest of alternative energy technologies?